Thursday, June 12, 2008
Political Mayhem Thursday: Energy Policy
It was an interesting week for energy policy on Capitol Hill. First, the Democrats tried to pass a windfall profits tax on oil companies, an effort that was beaten back by Republicans. Second, the Republicans successfully defended tax breaks for those same oil companies. Third, the Democrats tried to extend tax breaks to alternative energy producers (wind, solar, etc), but that effort was defeated by Republicans. Thus, unless things change, in the near future oil companies will get tax breaks for exploration while non-oil energy producers will see their government incentives go away. That's a bizarre energy policy at a time when we all know oil production cannot be the answer for energy needs beyond the very near future.
I believe in free markets. Because of that, I think both the Republicans and the Democrats are wrong. First, the Republicans are wrong to use my tax money on incentives for oil companies to drill, when the market is already providing amazing incentives for doing exactly that. Second, it is wrong for the Democrats to want to use my tax money to give incentives to alternative producers, when right now the market is ready to richly reward those same producers.
Does it strike anyone else as wrong that all these politicians want to give our money to corporations in the form of tax breaks? After all, they have to tax me to make up for what they don't get from those corporations (to fund the war in Iraq, which was supposed to help assure steady oil prices).
So, what should our energy policy be?
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Well, I'll agree that windfall profits taxes are silly, but as a beltway lefty I do think we should tax oil (really all carbon emitting fuel sources) more. Basically a bigger gas tax, like President Clinton wanted in his first term. Since that does just make an already tough life tougher for the poor, I would make the tax revenue neutral by having a cut in the payroll tax or some other tax aimed at poor and lower middle class tax groups to offset the higher gas prices.
If you believe that our current oil use produces negative externalities then the incentives to develop alternate energy sources are still too low.
If you believe that our current oil use produces negative externalities then the incentives to develop alternate energy sources are still too low.
a flat tax on corporations and individuals, without any credits, deductions, incentives, etc etc would solve most of our problems but would really leave congress with nothing to do for most of the year. They could spend the year figuring out how best to spend the money, I guess.
If we all paid the same rate, and corporations paid the same rate, we could really have some free market competition (with the obligatory amount of regulation).
And the decisions by congress to raise the tax rate by like .00001 or so will have some serious consequences and make for interesting. But it would be really easy to see if the government was spending the money well and not give one industry an advantage over another. (Mind you this is how we pay sales tax and property taxes, and no one complains about the fairness other than the inevitable raises in the rate)
We would however have to find jobs for all the IRS agents and most of the H&R Block workforce, but the hard part would be figuring out what to Tax for corporations. Output, purchases, payroll, profits? Each has it's drawbacks and pluses. In many ways, corporations already use the flat tax, but it varies from industry to industry and changes based on incentives etc.
But I still happen to think that a flat tax is the way to go as an economic engine and a fair way to treat corporations and industries.
If we all paid the same rate, and corporations paid the same rate, we could really have some free market competition (with the obligatory amount of regulation).
And the decisions by congress to raise the tax rate by like .00001 or so will have some serious consequences and make for interesting. But it would be really easy to see if the government was spending the money well and not give one industry an advantage over another. (Mind you this is how we pay sales tax and property taxes, and no one complains about the fairness other than the inevitable raises in the rate)
We would however have to find jobs for all the IRS agents and most of the H&R Block workforce, but the hard part would be figuring out what to Tax for corporations. Output, purchases, payroll, profits? Each has it's drawbacks and pluses. In many ways, corporations already use the flat tax, but it varies from industry to industry and changes based on incentives etc.
But I still happen to think that a flat tax is the way to go as an economic engine and a fair way to treat corporations and industries.
# posted by 
: 10:00 AM
: 10:00 AM
There's a difference between not enacting a windfall profits tax and not creating new tax breaks.
I think the first is a bad idea, but have no problem with creating tax breaks for smaller, developing industries... so long as Congress has the guts to take the breaks away at a later date.
The less messing with tax policy, the better however. The food supply mess created by the ethanol craze is the latest case in point.
Our energy policy is definitely insane. A carbon tax would help change demand, yet as Tom O'Gorman points out, its regressive.
One thing I think Congress should do is to dramatically increase the CAFE standards, forcing ALL automakers, not just the American companies, to increase fuel efficiency on vehicles.
I think the first is a bad idea, but have no problem with creating tax breaks for smaller, developing industries... so long as Congress has the guts to take the breaks away at a later date.
The less messing with tax policy, the better however. The food supply mess created by the ethanol craze is the latest case in point.
Our energy policy is definitely insane. A carbon tax would help change demand, yet as Tom O'Gorman points out, its regressive.
One thing I think Congress should do is to dramatically increase the CAFE standards, forcing ALL automakers, not just the American companies, to increase fuel efficiency on vehicles.
# posted by : 10:34 AM
: 10:34 AM
Even the Chinese require higher fuel efficiency in their cars than the Americans. Imagine that.
It'd help if we didn't have an administration in the pocket of the Saudis and Big Oil.
It'd help if we didn't have an administration in the pocket of the Saudis and Big Oil.
# posted by : 11:08 AM
: 11:08 AM
"It'd help if we didn't have an administration in the pocket of the Saudis and Big Oil"
When you go to liberal training camp do they just hand out playbooks with little phrases like this?? I imagine it reads something like, "whenever the topic of energy policy comes up, make sure to reference the spectre of Big Oil and our links to the Saudis...that always gets them."
You're right, the administration generally supports oil interests both domestically and internationally. You know what's interesting about that....that makes them exactly like every previous administration at least in the last century. Oil is important. We need it. Do you think its better to work with and protect the people that provide it, or to piss them off??
Energy Policy: we need to drill, drill, and then drill some more. ANWR, coastlines....anywhere we can find it we should go get it. We will eventually develop cheap alternative fuel sources that can replace oil in certain sectors of the economy, but until that time we should do everything we can to provide some stability to our oil supply.
Finally, can anybody tell me what "windfall profits" are? Isn't that just code for "profits democrats don't like"? If a hemp clothing company was making the same kind of money do you think Nancy Pelosi would be talking about it?
Crazy conservative out...
When you go to liberal training camp do they just hand out playbooks with little phrases like this?? I imagine it reads something like, "whenever the topic of energy policy comes up, make sure to reference the spectre of Big Oil and our links to the Saudis...that always gets them."
You're right, the administration generally supports oil interests both domestically and internationally. You know what's interesting about that....that makes them exactly like every previous administration at least in the last century. Oil is important. We need it. Do you think its better to work with and protect the people that provide it, or to piss them off??
Energy Policy: we need to drill, drill, and then drill some more. ANWR, coastlines....anywhere we can find it we should go get it. We will eventually develop cheap alternative fuel sources that can replace oil in certain sectors of the economy, but until that time we should do everything we can to provide some stability to our oil supply.
Finally, can anybody tell me what "windfall profits" are? Isn't that just code for "profits democrats don't like"? If a hemp clothing company was making the same kind of money do you think Nancy Pelosi would be talking about it?
Crazy conservative out...
# posted by : 11:31 AM
: 11:31 AM
You're right, as in most things, the D's and R's are both wrong. But they're also both right to oppose the measures they did. Sure, the oil will all dry up on day and we should plan for it. But my car, and millions more, are going to keep running on petroleum until somebody gives us a VIABLE alternative. Not a hybrid Tahoe that costs more than a BMW and gets the same milage as what I drive now, or an E85 car that inflates Big Macs to $10 by driving corn prices up. Viable is electric cars that go further than 100 miles/charge and LNG stations available for cross-country trips. Planning for the future also mean we've got to find enough oil to run the world until we figure these things out. The crude we need for that time period is out there, it's just 30 miles under the ocean or in some other godforsaken place, so we have to pay off big oil to go get it for us. Their shareholders aren't going to put in the massive capital required for this new exploration without some major profits on the other end, and for that they need the tax breaks.
On the other side, quick history lesson. The government has been subsidizing alternative energy since that term was coined. The left has the same incestuous relationship with this industry that the right has with big oil. No clean hands here. The time has never been better to incentivize alternative energy, but powerful lobbys have misplaced the breaks, and thats what the Dem measure would have done. Think wind farms in wierd places, research earmarks to pet co-ops, corn gas (!?! and nobody thought this was a hairbrained idea cooked up in Iowa?). These Dem measures get killed because they don't do anything to advance alternative energy, but they do line some pockets. The good stuff (like major across the board NAS research dollars) gets passed. Same DC dance, (sorta) new partners.
On the other side, quick history lesson. The government has been subsidizing alternative energy since that term was coined. The left has the same incestuous relationship with this industry that the right has with big oil. No clean hands here. The time has never been better to incentivize alternative energy, but powerful lobbys have misplaced the breaks, and thats what the Dem measure would have done. Think wind farms in wierd places, research earmarks to pet co-ops, corn gas (!?! and nobody thought this was a hairbrained idea cooked up in Iowa?). These Dem measures get killed because they don't do anything to advance alternative energy, but they do line some pockets. The good stuff (like major across the board NAS research dollars) gets passed. Same DC dance, (sorta) new partners.
I hate to sound like a Libertarian, (Which I am not) but all this can be avoided if we stop giving breaks or incentives to ANYONE. If we use that money to fund education and research at universities we can develop the technologies that we need without the help of these companies. We can also learn how to make better use of the resources we do have or have found.
No need to keep drilling etc when we can increase our efficiency.
No need to keep drilling etc when we can increase our efficiency.
# posted by : 12:31 PM
: 12:31 PM
I think the answer lies in a multi-part approach that changes both the way we look at energy production in America and the way we look at energy consumption in our daily lives.
The cruel fact that lies under all this stuff is that oil is a finite resource. There is a limited amount of it, and there's nothing we can do to make more of it. This is problematic, as it pretty much shapes the way we live. As long as they are selling a high-demand product in limited supply, oil companies are always going to make profits, and those profits are always going to be seen as excessive. It's the nature (and arguably the basis) of our economic system of capitalism. However, I don't think the answer lies in windfall profit taxes, simply because it's very unlikely those companies would choose to reduce the amount of profits they make so as to avoid taxes. The tax would become a part of the cost of doing business, and that cost would be passed on to the consumer. Windfall profit taxes may be a solution for a budget crisis (another issue for another thursday), but it doesn't solve the problem of high energy costs.
The fact is that until we create a viable, sustainable alternative primary energy source to replace oil, this problem is going to continue to exist, and likely to get worse. The debate about $4 gas will go by the wayside, and the debate about $7 gas will prevail (and $4 gas will seem as sweet a deal as $2 gas does now). The other issue is our dependence on oil as a way of life. Not just as our primary source, but the fact that oil powers everything we do. We are a culture of drivers, and the thought of manual-powered transportation sends us into hysterics. Until we as a culture learn that walking, biking, and just staying put are viable and preferable alternatives to burning gas, we're going to continue to suckle at the bitter, black teat of oil consumerism. And that teat is going to run dry.
As Americans, we have to have an incentive to do something, and that incentive is money. While Mr. Davis claims that the alternative energy industry has been subsidized in the past (and he's right), the fact remains that the oil industry remains one of the most powerful lobbies on the Hill, and it certainly doesn't help when many members of the current administration are buddy-buddy with their interests. As long as oil has a controlling stake in our government, there will never be enough money, energy, and effort put into reducing the size and power of that enterprise. American science has been able to do some amazing things when our efforts are heavily concentrated and the stakes are high. We have been able to design infrastructures, create bombs out of atoms, and even land a space probe on a comet. However, the stakes are not yet high enough (sadly) and the obstacles standing in the way of progress have not been moved, so we haven't seen the kinds of developments we know are possible. More subsidies may help this, but again, until you move the giant boulder that is the American Oil culture, you're never going to move further down the road.
The cruel fact that lies under all this stuff is that oil is a finite resource. There is a limited amount of it, and there's nothing we can do to make more of it. This is problematic, as it pretty much shapes the way we live. As long as they are selling a high-demand product in limited supply, oil companies are always going to make profits, and those profits are always going to be seen as excessive. It's the nature (and arguably the basis) of our economic system of capitalism. However, I don't think the answer lies in windfall profit taxes, simply because it's very unlikely those companies would choose to reduce the amount of profits they make so as to avoid taxes. The tax would become a part of the cost of doing business, and that cost would be passed on to the consumer. Windfall profit taxes may be a solution for a budget crisis (another issue for another thursday), but it doesn't solve the problem of high energy costs.
The fact is that until we create a viable, sustainable alternative primary energy source to replace oil, this problem is going to continue to exist, and likely to get worse. The debate about $4 gas will go by the wayside, and the debate about $7 gas will prevail (and $4 gas will seem as sweet a deal as $2 gas does now). The other issue is our dependence on oil as a way of life. Not just as our primary source, but the fact that oil powers everything we do. We are a culture of drivers, and the thought of manual-powered transportation sends us into hysterics. Until we as a culture learn that walking, biking, and just staying put are viable and preferable alternatives to burning gas, we're going to continue to suckle at the bitter, black teat of oil consumerism. And that teat is going to run dry.
As Americans, we have to have an incentive to do something, and that incentive is money. While Mr. Davis claims that the alternative energy industry has been subsidized in the past (and he's right), the fact remains that the oil industry remains one of the most powerful lobbies on the Hill, and it certainly doesn't help when many members of the current administration are buddy-buddy with their interests. As long as oil has a controlling stake in our government, there will never be enough money, energy, and effort put into reducing the size and power of that enterprise. American science has been able to do some amazing things when our efforts are heavily concentrated and the stakes are high. We have been able to design infrastructures, create bombs out of atoms, and even land a space probe on a comet. However, the stakes are not yet high enough (sadly) and the obstacles standing in the way of progress have not been moved, so we haven't seen the kinds of developments we know are possible. More subsidies may help this, but again, until you move the giant boulder that is the American Oil culture, you're never going to move further down the road.
I saw two wind farms on a family driving vacation last week - it was a beautiful sight.
Energy policy has to strongly support alternative sources, even if wind farms don't make campaign contributions!
Energy policy has to strongly support alternative sources, even if wind farms don't make campaign contributions!
# posted by : 2:26 PM
: 2:26 PM
To answer rrl's comments about "liberal handbook..."
I vote Republican and I don't know a single thinking Republican who would deny that the statement about the Bush Administration and Big Oil is true.
It's our biggest shame. We consistently support Big Oil (and the Saudis) over the American people. You don't have to do much serious research to know that's true, rrl.
Democrats have their own problems. Ours is that we're sluts to oil.
DHM
I vote Republican and I don't know a single thinking Republican who would deny that the statement about the Bush Administration and Big Oil is true.
It's our biggest shame. We consistently support Big Oil (and the Saudis) over the American people. You don't have to do much serious research to know that's true, rrl.
Democrats have their own problems. Ours is that we're sluts to oil.
DHM
# posted by : 3:58 PM
: 3:58 PM
I just don't think that its true that Republicans are any worse about that than Democrats. I bet if I did some serious research I would find that oil companies make heavy campaign contributions to both parties. I also think you would find that the track record of Democrats v Republicans in terms of actual policy towards oil companies wouldn't be that different.
I agree that oil companies are big and have lots of influence in American politics. I just find it a little naïve to believe they only have friends/allies/protectors on one side of the aisle.
I agree that oil companies are big and have lots of influence in American politics. I just find it a little naïve to believe they only have friends/allies/protectors on one side of the aisle.
# posted by : 4:52 PM
: 4:52 PM
In fact, without serious research I was able to uncover that the presidential candidate that has received the most in contributions from Exxon Mobil this year is.....McCain...nope....Hillary....nope....
That's right, its old Barack Obama. And last time I checked he is a Democrat.
That's right, its old Barack Obama. And last time I checked he is a Democrat.
# posted by : 5:02 PM
: 5:02 PM
I like Justin T's point, that the stakes are still not high enough for the US to make real change in its energy use and policy. In my opinion, we are great at fixing things, but things have to get DIRE before we get the national will to make real change. I hope it's not true, but it's possible that Americans won't stop driving so much and start developing real alternatives until we are close to having no oil, or until it's $8 a gallon.
For a really sobering wake-up call about the dwindling supply of oil, watch the film "Oil Crash."
http://www.oilcrashmovie.com/
The filmmaker (who spoke at our school) says we'll reach a point at which we won't be able to take flights anywhere anymore, because oil will be so scarce.
And he also makes the point that oil used for powering cars is just the tip of the iceberg. It's also used in manufacturing all sorts of things, substances, clothes, you name it, that have nothing to do with cars.
For a really sobering wake-up call about the dwindling supply of oil, watch the film "Oil Crash."
http://www.oilcrashmovie.com/
The filmmaker (who spoke at our school) says we'll reach a point at which we won't be able to take flights anywhere anymore, because oil will be so scarce.
And he also makes the point that oil used for powering cars is just the tip of the iceberg. It's also used in manufacturing all sorts of things, substances, clothes, you name it, that have nothing to do with cars.
# posted by : 5:20 PM
: 5:20 PM
Guinn said the oil companies made a 45 billion dollar profit compared to last years 18 billion. I'm all for taxing them. At least we can pay off some debt and help the dollar that way.
As far as tax breaks, I don't really care for them. Like you pointed out, why should the oil get breaks when none of the other energy groups do.
As far as tax breaks, I don't really care for them. Like you pointed out, why should the oil get breaks when none of the other energy groups do.
rrl, that's an unfair comparison.
First, if you look at the stats, of all the supposed "oil money" going around, Obama has half of what McCain has gotten. Second, because Obama doesn't accept money from lobbists and PACs, the only reason his name is on the radar is because of individual donations from folks who work for oil companies. If you take into account the money that McCain has gotten from lobbiests and PACs, Obama is not even a blip on the radar.
First, if you look at the stats, of all the supposed "oil money" going around, Obama has half of what McCain has gotten. Second, because Obama doesn't accept money from lobbists and PACs, the only reason his name is on the radar is because of individual donations from folks who work for oil companies. If you take into account the money that McCain has gotten from lobbiests and PACs, Obama is not even a blip on the radar.
# posted by : 9:29 PM
: 9:29 PM
To rrl:
Please check your figures and research (and that does not mean listening to podcasts of Rush or Ann Coulter).
As a Republican, it embarrasses me when Republicans don't do their homework. As a party, we have been hostage to the oil companies for decades. Where do you think W. and Dick go their fortunes? Gracefully admit it.
There are plenty of other areas to beat up the Democrats on. We lost the moral high ground on this one years ago.
DHM
P.S. And I'm with Jessica. The Razor isn't fun when we get into this stuff.
Please check your figures and research (and that does not mean listening to podcasts of Rush or Ann Coulter).
As a Republican, it embarrasses me when Republicans don't do their homework. As a party, we have been hostage to the oil companies for decades. Where do you think W. and Dick go their fortunes? Gracefully admit it.
There are plenty of other areas to beat up the Democrats on. We lost the moral high ground on this one years ago.
DHM
P.S. And I'm with Jessica. The Razor isn't fun when we get into this stuff.
# posted by : 11:35 PM
: 11:35 PM
Pot meet kettle, kettle meet anonymous.
Can you really complain about a political conversation not being fun when you are one of 2 people having an argument?
I'm all for witty and snappy political discourse, especially on Thursdays (They never get any love).
Seems like the Razor has a majority of "taxers" reading it.
It's only a matter of time before us "free market" guys pack up and leave!
Since we're only a few minutes away from Friday, I'd like to reiterate that any production issues, technological developments, or supply issues will be quickly worked out by the market if the goverment gets out of the business of giving tax breaks, incentives, or taxing "windfall" profits, and dead people. History has shown the market to fix it all.
The chair you sit in is probably mostly made of plastic but 50 years ago would have surely been made of wood. Once wood became scarce and too expensive to use, the market provided us with plastic. I remember how everyone thought we wouldn't have anywhere to sit because we were running out of wood. Luckily the space guys at Area 51 came up with this plastic stuff my butt is resting on now. I'm sure it's only a matter of time before we find the plastic butt holder for oil!
The real problem is that no one has any balls to tell the American people to suck it up and let the market do it's thing.
On to Friday amigos!
Can you really complain about a political conversation not being fun when you are one of 2 people having an argument?
I'm all for witty and snappy political discourse, especially on Thursdays (They never get any love).
Seems like the Razor has a majority of "taxers" reading it.
It's only a matter of time before us "free market" guys pack up and leave!
Since we're only a few minutes away from Friday, I'd like to reiterate that any production issues, technological developments, or supply issues will be quickly worked out by the market if the goverment gets out of the business of giving tax breaks, incentives, or taxing "windfall" profits, and dead people. History has shown the market to fix it all.
The chair you sit in is probably mostly made of plastic but 50 years ago would have surely been made of wood. Once wood became scarce and too expensive to use, the market provided us with plastic. I remember how everyone thought we wouldn't have anywhere to sit because we were running out of wood. Luckily the space guys at Area 51 came up with this plastic stuff my butt is resting on now. I'm sure it's only a matter of time before we find the plastic butt holder for oil!
The real problem is that no one has any balls to tell the American people to suck it up and let the market do it's thing.
On to Friday amigos!
# posted by : 12:22 AM
: 12:22 AM
One thing we ought to be doing for sure is funding alternative energy research. I think that all research is better done by academics than private companies, but that's just my pro-academia bias showing.
I think that each side was using something that would mobilize their base as a political football. The problem is that with oil being so wildly profitable right now, there can be no free market pressure to develop alternative sources. Free markets only work where you have intelligent, informed consumers capable of exercising choice. We're like junkies with oil -- we'll pay their ridiculously high prices no matter what. I can't think of a price that would be so high I would stop driving... cut back, sure, but stop altogether? Or stop running my AC during a Texas summer? Not a chance. They've got me hooked.
Of course, my first preference would be remove control of these precious natural resources from the hands of hoarders/exploiters and turn them over to the democratic control of the people, but that is only a fond pipe dream. And it has its own attendant problems -- instead of intelligent, informed consumers capable of choice, we'd need intelligent, informed citizens capable of restraint and foresight. And those aren't qualities I think most of humanity possesses at the moment.
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I think that each side was using something that would mobilize their base as a political football. The problem is that with oil being so wildly profitable right now, there can be no free market pressure to develop alternative sources. Free markets only work where you have intelligent, informed consumers capable of exercising choice. We're like junkies with oil -- we'll pay their ridiculously high prices no matter what. I can't think of a price that would be so high I would stop driving... cut back, sure, but stop altogether? Or stop running my AC during a Texas summer? Not a chance. They've got me hooked.
Of course, my first preference would be remove control of these precious natural resources from the hands of hoarders/exploiters and turn them over to the democratic control of the people, but that is only a fond pipe dream. And it has its own attendant problems -- instead of intelligent, informed consumers capable of choice, we'd need intelligent, informed citizens capable of restraint and foresight. And those aren't qualities I think most of humanity possesses at the moment.
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